Our DailyMarket Reports

Mid-Day Gold & Silver Market Report 2/29/2012

2/29/2012 12:06:49 PM By: Brandi Brundidge

GOLD DIPS AS FED CHAIRMAN SPEAKS

As Federal Reserve Board Chairman Ben Bernanke spoke to the House Financial Services Committee this morning, the Gold price took a quick dive. At one point, Gold was down more than $70 per ounce. On the labor market, Bernanke said, “The job market remains far from normal,” as the unemployment rate has dropped to 8.3 percent in January from a staggering 9 percent for the majority of 2011. On the economy, he said, “The recovery of the U.S. continues, but the pace of expansion has been uneven and modest by historical standards.” Typically, investors find it difficult to trust the Federal Reserve on the promises it makes. Some analysts worry that the time frame given to extend low interest rates to late 2014 may be pulled back, or that Bernanke will call for QE3 (a third round of quantitative easing). If another round of QE occurs, it will allow the Federal Reserve to print more money to push into the economy. In effect, this will create more dollars chasing fewer goods. The past two QE phases had shown to not have aided the U.S. economy substantially.

The Gold price began to fall a bit this morning then continued to drop as the euro fell after the European Central Bank infused nearly a half-trillion euros into the banking system. Laurent Fransolet at Barclays Capital said, “The astonishing number this time is the number of banks participating, which signals that a lot more small banks looked for the money, and it is likely they will pass it on to the economy.” This release of funds from the ECB is designed to allow more time for European politicians to solve the eurozone’s financial crisis.

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